What does the new Energy Price Guarantee mean for your business?
Businesses to receive a 6-month price guarantee on energy bills.
08 September 2022 • 3 minute read

In her first major policy announcement since becoming prime minister, Liz Truss announced a significant state intervention into the energy market, with a package estimated to be worth some £150bn. Official details of the total cost will form part of the planned emergency Budget in a couple of weeks.
For households, a two-year price guarantee will limit the average household energy bill to £2,500 a year. The previously announced £400 one-off payment to all households is still in place, along with other support measures for those on the lowest incomes.
There is "equivalent support" for businesses, but it is unclear what this means as it is not confirmed whether the same unit cost will apply to business customers. The support for businesses is only for six months. At that stage, a review will decide which sectors are the most "vulnerable industries" that need further help. Truss cited hospitality as one example.
Newly installed business secretary Jacob Rees Mogg will conduct a three-month consultation to confirm the details of which sectors will get what support after the six-month cap expires.
What will be the impact on inflation?
The prime minister announced that this action would take five percentage points off inflation. The measure is expected to reduce the support package cost by reducing immediate debt interest.
However, the Bank of England's chief economist, Huw Pill, told a Parliamentary committee on Wednesday, that while such an intervention would have a short-term impact on inflation, it was less clear what the longer-term effect would be and how it would impact the Bank's actions on interest rates.
"The short-term impact may not be the most important thing from a monetary policy point of view," said Pill. "Some of the implications of supporting household incomes will support demand in the economy and - other things equal - will probably lead to slightly stronger inflation."
Focus on energy security
Truss also outlined a desire to focus on energy security and to reform the sector so that the UK "never finds itself in this situation again". There will be a new Energy Supply Taskforce, modelled on the vaccine supply taskforce, and a major rethink on new domestic fossil fuel supplies. The latter included plans to grant 100 new licences for oil and gas in the North Sea and lift the fracking ban.
She also announced plans to work with the electricity suppliers to reform the current arrangements whereby electricity, regardless of source, is linked to the price of gas. So-called "contracts for difference" would replace the current set-up, with the price fixed only to the cost of production. There is also a new Bank of England scheme to provide liquidity to the wholesale energy providers.
"This plan is pro-growth, pro-business and pro-investment," declared Truss.
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